Media giant plots offer for ITV

GERMAN media giant Bertelsmann is poised to make an all-share offer for Carlton and Granada through its quoted subsidiary RTL - if the two ITV companies merge.

Carlton and Granada called off merger talks last week after failing to agree terms, but Bertelsmann expects the ITV companies to combine sooner rather than later. RTL would have to sell its majority stake in Channel 5 to bid for the ITV companies. But the Germans would gain a bigger share of the UK commercial television market at a stroke.

The uncertain outlook for the UK television market has prompted RTL to reject offering a cash premium for Carlton and Granada, which have a combined stock market value of £4.8bn - roughly the size of Bertelsmann's cash pile.

A Bertelsmann source said: 'If you pay a cash premium at this level of the market you have to have a view on where the market is going, and no one is that certain.'

Carlton and Granada have been badly hit by declining advertising revenues and an £800m investment in ITV Digital, their loss-making joint venture. ITV Digital last week appointed Deloitte & Touche to review its costs, though accountancy sources suggest the company has been brought in to undertake an 'orderly insolvency' of the business.

There are few, if any, signs of an upturn in the advertising market before at least the second half of the year. Bertelsmann is understood to be satisfied that it will not have long to wait for Granada chairman Charles Allen and his Carlton counterpart Michael Green to sort out their differences, which centre on Granada's valuation of Carlton as well as the future of ITV Digital.